We’ve talked about the benefits of being ‘Made in France’ before, but a whole new designation might be joining the pack.
The European Commission is considering new rules that would give European-made products a ‘Made in Europe’ designation, giving them preferential treatment in areas like public procurement and government support.
Understandably, a big question over the new proposal is whether European nations outside of the EU (namely the United Kingdom) will count as ‘Made in Europe’.
The answer may be another post-Brexit blow to UK businesses—and another argument for expanding or moving your business to an EU country.
What is ‘Made in Europe’ intended to do?
Formally known as the Industrial Accelerator Act, the Commission’s proposal is part of a broader attempt to strengthen European industry. The basic idea is relatively simple: European governments spend huge sums buying products and services, from vehicles and construction materials to energy infrastructure. If that money can be directed towards companies manufacturing within Europe, it creates demand for European production.
What this looks like in practice is the introduction of both ‘Made in EU’ and low-carbon requirements for public procurement and public support schemes. The initial target sectors for both schemes include steel, cement, aluminium, cars and net-zero technologies, all areas where the EU is keen to boost production, and decrease its reliance on imports.
Rather than the ‘Made in France’ label being a hallmark of quality, ‘Made in EU’ would be a sign that a product meets eligibility criteria for procurement. In that respect, it is closer to something like an ISO standard or Cyber Essentials, where businesses need to demonstrate that they meet certain standards in order to be eligible for procurement contracts.
In theory, this should encourage businesses to invest in more factories, technology, and skilled workers within the EU, rather than relying on cheaper imports. There’s also the wider strategic objective of avoiding disruption caused by geopolitical tensions and trade disputes, which have exposed vulnerabilities in global supply chains over the past decade.
One example that’s already bearing fruit is batteries. The EU has already established a €1.5 billion Battery Booster Facility to help European battery manufacturers increase production, with the aim of developing a European battery supply chain, rather than remaining dependent on imports. This is essentially the template the EU would like to roll out to other security-critical and economically viable industries.
The potential benefits for European businesses
Any change presents opportunities, but this law could be a particularly tantalising one for entrepreneurs. By reducing competition from outside markets and encouraging investment, the EU is essentially looking to rebuild its industrial base. That could come with plenty of opportunities for nascent businesses, as well as established ones.
A business in Germany’s ‘Mittelstand’ that makes components for electric vehicles, for example, could potentially benefit from greater local demand and reduced costs. The same could apply to companies involved in renewable energy, construction materials, industrial equipment, batteries, and other strategically important sectors.
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It could also encourage larger manufacturers to establish more of their supply chains within Europe. That matters to smaller companies because major manufacturers rarely produce everything themselves. A car factory needs thousands of components and services, and a battery plant needs specialist equipment, logistics, and engineering expertise. All of this creates opportunities for talent as well as small businesses providing these services.
It’s also building on a solid foundation in the EU's existing Horizon Europe scheme. It already has a €1.8 billion budget for research and innovation in advanced and sustainable manufacturing, and is open to SMEs as well as larger companies, research organisations, and universities, providing both proof of concept and the EU’s longstanding commitment to business innovation.
If you’re in France specifically, this is reason enough to be excited. France is already one of Europe's biggest industrial economies, with an established presence in aerospace, car manufacturing, energy, engineering, and tech. The direction of travel from Brussels could reinforce those existing strengths, and make France a hub for European manufacturing.
Will UK goods be considered ‘Made in Europe’?
For all the damage and disruption caused by Brexit, the UK is still deeply integrated with the European economy. Many British manufacturers have European customers, and European manufacturers still rely on British suppliers. The automotive and aerospace industries are just two examples, with components for cars and aircraft crossing the Channel multiple times during the production process.
It’s little surprise then that the UK government has been lobbying for inclusion in the scheme. The British position is that excluding the UK would make little economic sense, given how closely the two economies remain connected. The government has told Parliament that it’s working with industry to assess the impact of the proposals, and has stressed that UK and EU supply chains are highly integrated.
This isn’t a complete non-starter. Germany has already proposed a broader concept of ‘Made with Europe’, under which trusted trading partners could qualify for access to European procurement markets where there’s reciprocal access for European businesses. They have proposed extending the system to countries with suitable trade agreements, or commitments to open public procurement markets, something the UK would theoretically qualify for. Unfortunately, there’s one big roadblock to this so far: France.
Why France wants a stricter definition
France's argument is essentially that European taxpayers' money should primarily support EU companies. The French government has advocated for a definition that limits the benefits of the policy to EU member states only. From a protection-of-industry perspective, this makes sense: if the idea is to strengthen European manufacturing, letting companies outside the EU to enjoy the same benefits could dilute its impact.
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Inevitably, there’s also a geopolitical dimension to this. A large part of the discussion around the Industrial Accelerator Act is concern about competition from China. The feeling is that European manufacturers increasingly can't compete with state-subsidised Chinese products, particularly in areas like electric vehicles and cleantech.
The worry is that countries like China could essentially take advantage of the ‘Made in EU’ designation by moving production to a third-party country like the UK, and nullify the benefits for the rest of Europe. Without a strong enough agreement and enforcement from all member countries, China could amble through a backdoor into European markets.
The potential impact on British businesses
The UK government’s reaction is a reflection of how damaging this could be to an already struggling economy. The UK's automotive sector has already warned that excluding British companies could create serious problems. The EU remains hugely important to British car manufacturers, accounting for more than half of UK vehicle exports. Most companies are also no longer British-owned, and so have less incentive to stay in the UK if conditions worsen.
What the legislation represents is an enormous competitive disadvantage for UK businesses when trading with their biggest (and nearest) market. British businesses wouldn’t be unable to sell to Europe, and the policy as implemented might not look the same as it does now. But the ramifications should the UK be excluded could be catastrophic for its already dwindling industrial base.
There’s also an argument that excluding Britain could work against European interests. German officials have pointed out that restricting the number of potential suppliers could both increase costs and reduce competition. European businesses themselves also benefit from access to British companies and expertise, putting European supply chains at risk.
Could it make starting a business in Europe more attractive?
One person’s problem is always another’s opportunity, and this is no exception. In the same way that many businesses shifted operations to Europe ahead of the Brexit deadline, this looming legislation could encourage another wave of departures. While moving production to France or another EU country can be an enormous undertaking, doing so could be a matter of survival.
For a new business, it’s a different proposition entirely. If the EU increasingly directs public procurement and industrial support towards businesses operating within its borders, being inside that market could become an advantage. Opening a factory in France or Germany is easier said than done (manufacturing will continue to be expensive), but it could become more viable than it has been at any point this century.
While EU programmes are providing funding for things like manufacturing innovation and battery technology, individual countries are also chipping in. Many now offer their own grants, tax incentives, and investment programmes to compete for foreign investment within the EU marketplace. This is likely to intensify if the ‘Made in EU” scheme does come into effect, with internal competition still benefitting the EU as a whole.
It’s hard to make any sweeping proclamations about legislation that hasn’t come into effect yet. On the face of it, though, ‘Made in Europe’ could be transformative for the European economy, at least within specific industries. That could also still include the UK, with UK lawmakers still lobbying hard, and a strong economic argument for maintaining close UK-EU industrial link.
What does seem clear is that Europe is becoming more interested in building its own industrial capacity, and with that come opportunities for entrepreneurs. If the EU already has a huge consumer market, industrial expertise, and a willingness to invest in strategic sectors, all of that will be amplified. That’s good news for France in particular, which already has an established manufacturing base and a presence in tech, aerospace, energy and engineering.
If you’re considering taking advantage of the upcoming legislation and starting a business in Europe, we can help. Euro Start Entreprises has 20 years of experience helping entrepreneurs and businesses get started in Europe. Download our European formation guide below, or get in touch today to find out how we can help you.
